The stock jumped 4.8 percent, the most in more than a
month, to HK$7.02, trimming the loss this year to 38 percent.

Xinkuaibao apologized for failing to verify stories by its
reporter Chen Yongzhou, following a report aired by state-run
China Central Television on Oct. 27 that showed footage of Chen
being interrogated by police in Changsha. The stories alleged
Zoomlion was involved with “losses” of state assets, irregular
revenues and forging sales and financial information, according
to the CCTV report.

“The fact that the newspaper probably won’t dig further
into the Zoomlion case is positive for shares,” said Mari Oshidari, a Hong Kong-based strategist at Okasan Securities
Group Inc. “There was a possibility Zoomlion’s alleged improper
accounting would get more attention after the reporter’s arrest.
After the reporter and the newspaper apologized, it’s unlikely
there will be further media reports questioning its
accounting.”

CCTV’s broadcast and the newspaper’s apology “makes a
complete mockery of this ‘China is a country under rule of law’
nonsense that we get fed,” said Jeremy Goldkorn, founding
director of Danwei.com, a Beijing-based firm that researches
China’s media and Internet.

Political Element

“I don’t know the specifics of this case, but you don’t
get a confession on CCTV unless there is some political element
to it,” Goldkorn said.

Xinkuaibao’s apology appeared in the bottom left-hand
corner of the front page of yesterday’s edition, according to an
electronic version. The Guangzhou-based daily said its initial
response, which included calling for the police to release Chen,
was inappropriate and “seriously hurt the credibility of the
press.”

The newspaper may have been pressured to apologize,
Goldkorn said. “If you look at the front page, it’s in a tiny
corner, it doesn’t look like a very sincere apology.”

Dressed in a detention-center vest, handcuffed and with his
head shaved, Chen was heard saying that the information he
released was “absolutely not objective” and that “I’m willing
to admit to the crime and repent.”

Deep Apology

Chen allegedly told police he accepted payments in exchange
for publishing fabricated reports about Zoomlion. The company
in February and May denied allegations by the newspaper that it
falsified sales. On May 28, it said an article accusing it of
improperly accounting for sales was “distorted” and
“misleading.”

In its statement yesterday, Xinkuaibao said the police’s
initial investigation showed Chen published “a lot of incorrect
reports and took money.” The newspaper failed to carefully
review his articles before publishing them, it said.

It sent a “deep apology to all in society,” and pledged
to “earnestly correct the existing problem” and “demand our
editorial staff respect facts and abide by the law and
professional ethics.”

Xinkuaibao, translated as New Express, is part of the
Guangzhou-based Yangcheng Evening News Group, according to the
websites of both publications. Chen has worked at Xinkuaibao as
a reporter since graduating in 2009, the paper said.

Front-Page Appeals

Xinkuaibao made two front-page appeals last week for police
in Changsha, the capital of central Hunan province, to release
the 27-year-old reporter, who was detained Oct. 18. His arrest
follows a ruling by the country’s Supreme Court last month that
people who post defamatory comments online could face as long as
three years in jail.

“No matter he’s guilty or not, there are serious issues
with the procedures here,” Abe Yang, a lawyer with Dacheng Law
Offices in Shenzhen, said in a telephone interview, referring to
the airing of the program and Chen’s statement. “Even if the
police believe they have enough evidence, it’s up to the court
to decide whether he’s truly guilty.”

Zoomlion was formed out of Changsha Construction and
Machinery Research Institute, which was owned by the Ministry of
Construction, according to the company’s website.

Hunan State-Owned Assets held 19.97 percent of the A-shares
listed in Shenzhen as of April 2, according to data compiled by
Bloomberg. The government of Hunan owned 16.2 percent of
Zoomlion at the end of 2012, according to the company’s annual
report.

Police Investigation

Chen is the latest subject of a police investigation to be
shown on state television saying he committed wrongdoing.
American-Chinese venture capitalist and celebrity blogger
Charles Xue, who was detained in August on charges of soliciting
prostitutes, appeared on television the following month and said
the charges were true. Xue, who wrote on politically sensitive
topics to his 12 million followers, also said he behaved
irresponsibly in forwarding comments.

In July, Liang Hong, vice president and operations manager
in China for London-based GlaxoSmithKline Plc, said in
questioning shown on television that he used a travel agency to
bribe officials and hospitals. The company is part of a probe by
Chinese authorities into corruption in the pharmaceutical
industry.

Wealth, Fame

Chen was motivated by wealth and fame, CCTV said in its
report, citing the police. He was asked by other people, who
weren’t named in the report, to publish more than 10 pre-written
articles under his byline which “negatively affected”
Zoomlion, in exchange for hundreds of thousands of yuan of
payments, according to the report. He also told investigators
he was paid 500,000 yuan ($82,000) for notifying regulators of
the company’s practices, CCTV said.

No details about who gave Chen the money and who he wrote
the stories for were given in the CCTV report or in the
newspaper’s statement.

Police in Changsha received a complaint from the company on
Sept. 9, set up the case on Sept. 16, and arrested Chen in
Guangzhou on Oct. 18 after “possessing a large amount of
evidence,” CCTV said.

“Journalists are concerned that this will set a bad
precedent for local governments to suppress the media to protect
their businesses,” said Zhang Zhi’an, deputy dean of the School
of Communication and Design at Sun Yat-sen University in
Guangzhou. “Because only the primary state media are reporting
the case, it’s very difficult to get closer to the truth about
what exactly is not correct in those reports and whether and how
the journalist took money.”

China’s media are mostly state owned and regularly receive
instructions from propaganda authorities on what to cover,
making it unusual for newspapers to make a public stand.

Another journalist at the Xinkuaibao, Liu Hu, was arrested
Sept. 30 after posting allegations of wrongdoing by government
officials online. His lawyer Zhou Ze said on Oct. 10 he faced a
charge of defamation and had been in detention since Aug.24.